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Slight Delay In Pay Raises Helps OC Cut Budget Spending

OCEAN CITY – Tweaks made to the Ocean City budget for the upcoming year brings the proposed tax rate down a penny to the constant yield level.

A couple weeks ago Councilman Joe Mitrecic asked for an additional budget discussion prior to Fiscal Year 2015 Budget meeting its first reading on Monday.

“We are still a penny over the constant yield right now and I think that some of that in speaking with the budget manager can be reduced,” Mitrecic said at that time.

For the tax year beginning July 1, 2015, the estimated real property assessable base will increase by .330 percent, or from $8,489,127,273 to $8,517,156,880.

If the Town of Ocean City maintains the current tax rate of $.4720 per $100 of assessment, real property tax revenues will increase by .330% resulting in $132,300 of new real property tax revenues. In order to fully offset the effect of increasing assessments, the real property tax rate should be reduced to $.4704, the constant yield tax rate, which brings in the same amount of revenue as the prior fiscal year.

The city manager’s proposed budget did not reduce real property tax rate enough to fully offset increasing assessments but adopted a real property tax rate of $.4804 per $100 of assessment. This tax rate is 2.1 percent higher than the constant yield tax rate and generates $851,716 in additional tax revenues.

This week City Manager David Recor and Budget Manager Jennie Knapp presented a list of options and alternatives for further budget reductions in quarter penny increments for the Mayor and City Council’s review. Approval of the entire list of options would equate to a one penny reduction of the FY 15 tax rate, from .4804 to .4704, the constant yield rate. This is also a tax rate reduction from the FY14 rate of .472.

However, approval of all suggested changes would require an additional $157,280 from fund balance in the General Fund. This would increase the appropriation of unreserved fund balance from $775,000 to $932,280, but would continue to maintain fund balance above the 15 percent fiscal policy level.

Recor explained a couple of items within the list that would achieve a .25 of a penny reduction include the city delaying the increment pay raise consistent with the city’s largest bargaining unit, the Fraternal Order of Police, to Jan. 1, as well as the same for general employees that would reduce the tax rate by another .25 of a penny.

“I think it is fair to give the general employees a raise the same time as the police department gets their raise. They just got a raise in January and this would in fact give them another raise within a year,” Mitrecic said. “Any monies that were recognized through the year, I would like to have put into the Street Paving Fund and the Canal Dredging Fund.”

Councilman Dennis Dare pointed out another item is an increase in the estimate for building permit revenue at current rates to $50,000.

“It is justified to have building permit fees balance the costs of that department and the gap has grown somewhat. I think the fees need to be reviewed to see if it is warranted to raise them. In any case, in looking at the desire to fund IT, I concur but perhaps there is more room in building fees to recognize enough revenue to pay for the IT,” he said

Mitrecic agreed the increase in estimated building permit revenue is low.

“For somebody that deals in that office, I think that we can recognize another $25,000 out of that easily,” said Mitrecic, a builder. “I do think building permits have been coming in a very strong pace this spring so far.”

In speaking with Director of Planning and Community Development Matt Margotta, Knapp reported he was comfortable in estimating an increase to $50,000 but felt $70,000 was pushing it.

“There may be opportunity to recognize that revenue if there is consensus to move forward as Councilman Dare has suggested with a comprehensive review with the department’s fee schedule,” Recor said, to which the council gave the go ahead.

The council voted 5-2, with council members Brent Ashley and Margaret Pillas opposed, to add the list of changes to the proposed FY15 Budget to bring the tax rate down to constant yield.

“It seems to me that some of these things are kicking the can down the road a little bit,” Ashley said.

Pillas was opposed because she did not support the step pay raise in the collective bargaining agreement.

Earlier in the meeting, the Mayor and City Council voted to approve revisions to PPM 800-11 that changes the fund balance percentage from 12-15 percent of expenses to 15 percent and clarifies language from “general fund operating budget” to “prior year actual operating expenses.”

Like all governments, the town maintains an unassigned fund balance to pay for needs caused by unforeseen emergencies, to provide for unanticipated expenditures of a nonrecurring nature or to meet unexpected increases in service costs. This reserve will now be maintained at 15 percent of the general fund prior year actual operating budget expenses.